Expedia (NASDAQ: EXPE) did not have a good week. The online travel site, which competes with Priceline.com (NASDAQ: PCLN) for attention, reported abysmal earnings for the fourth quarter this past Thursday. The company suffered a huge loss of $9.60 per share. That's right, $9.60 per share! Kind of rocks your world, doesn't it? And not in a good way. I mean, Expedia's share price closed at $7.74 on Friday.
As you can imagine, there was an accounting issue going on (not that it should make shareholders feel any better, mind you). Expedia took a huge goodwill write-down related to the significant drop in the market capitalization of the business. We're talking $3 billion. Wow. Of course, management adjusted the earnings to represent what Expedia would have made without the charge. That would be $0.22 per share. Unfortunately, that missed expectations by two pennies.
That's a pretty bad earnings report. Not much to savor from it. If you look at the actual press release, you'll see not-so-good numbers relating to bookings and cash flows. While Expedia might be a great site to use in terms of making travel arrangements and finding interesting deals, you've got to remember that the economy is simply screwing up the company's thesis. People aren't willing to spend a lot of money on vacations these days, and such psychology is only going to deteriorate from here. The negative news flow concerning the markets is frightening everyone. Simply put, this is not a good time to be considering Expedia as an investment idea. Even though adjusted earnings were positive, I think a $9.60 accounting loss is not something to be ignored. Management stated that it has a lot of confidence in the value of brands such as Hotels.com and Hotwire.com. That's awesome to hear, but it doesn't make the short-term outlook attractive.
Expedia shares have a 52-week range starting at $6.00 and ending at $25.50. Like I said, its latest close was a little under $8. It's a weak stock that should be avoided. I suppose it could even be shorted, although I wouldn't recommend doing that, as the risk of an upturn due to volatility is just too great. Best to just forget about Expedia entirely.
Disclosure: I don't own any company mentioned; positions can change without notice.
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